Although the clubs have benefited from a benign claims run, the average cost of casualties continues to grow due to higher liability limits, bigger ships and stricter legal regimes.

“As the global economy recovers, the number of loss events could increase, and pricing decisions made now should reflect the prospect of higher claims frequency, as well as claims inflation,” said AM Best.

“In addition, volatile large loss experience, which is a key feature of the P&I market, has the potential to significantly impact the annual performance of the International Group overall, and its individual clubs.

AM Best warns that the prospect of lower investment returns means the clubs must achieve close to break-even underwriting performances to protect their increased capitalisation.

“AM Best believes that this will be difficult to achieve given the competitive pressure on premium rates and a challenging claims environment, characterised by volatile loss experience and inflationary pressure on the cost of claims," it said.

P&l club managers are expected to continue to explore diversification as part of wider growth strategies, realise economies of scale and achieve earnings stability.

The rating agency argues that the failure of the Britannia and UK clubs to consummate a proposed merger highlighted there were significant barriers to consolidation.

“Such a merger might have prompted further consolidation between clubs, but its failure is indicative of the difficulty in getting managers and members to support such a move,” observed the ratings agency.

Although the clubs have benefited from a benign claims run, the average cost of casualties continues to grow due to higher liability limits, bigger ships and stricter legal regimes.

“As the global economy recovers, the number of loss events could increase, and pricing decisions made now should reflect the prospect of higher claims frequency, as well as claims inflation,” said AM Best.

“In addition, volatile large loss experience, which is a key feature of the P&I market, has the potential to significantly impact the annual performance of the International Group overall, and its individual clubs.

AM Best warns that the prospect of lower investment returns means the clubs must achieve close to break-even underwriting performances to protect their increased capitalisation.

“AM Best believes that this will be difficult to achieve given the competitive pressure on premium rates and a challenging claims environment, characterised by volatile loss experience and inflationary pressure on the cost of claims," it said.

P&l club managers are expected to continue to explore diversification as part of wider growth strategies, realise economies of scale and achieve earnings stability.

The rating agency argues that the failure of the Britannia and UK clubs to consummate a proposed merger highlighted there were significant barriers to consolidation.

“Such a merger might have prompted further consolidation between clubs, but its failure is indicative of the difficulty in getting managers and members to support such a move,” observed the ratings agency.